- This week, Bitcoin's technicals have signaled a potential shift in its recent downtrend.
- The crypto found support around $39,500, raising hopes that the correction is ending.
- Potential trend reversal also hinges on ETF developments, Grayscale's GBTC, and global risk appetite, setting the stage for a pivotal next week.
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This week, Bitcoin traded along a downward-sloping support line, extending its gradual decline that began in early January.
This shift occurred as the cryptocurrency, experiencing nearly a 5% drop on the first day of the week, broke the downward trend after losing crucial support around the 41,000 area.
The support stabilized around $39,500 during a week marked by increased losses, instilling hope that the correction might have come to an end.
Examining the technical aspects, clear indicators are pointing to this region as a robust support point.
Notably, the 3-month EMA at $39,800 is considered a critical dynamic support for Bitcoin, historically triggering meaningful reactions.
Furthermore, the Fibonacci levels derived from the October-December surge remain relevant, with a support line first forming around Fib 0.236 during the correction, followed by a support line at Fib 0.382 at the breakout.
The support line formed by the convergence of the Stochastic RSI, which rebounded from the oversold zone following the ETF approval on January 11, indicates a potential recovery.
Purchases at this support level could signal an impending upward movement. However, decisive resistance levels stand ahead for Bitcoin's trend reversal.
Monitoring the daily chart, we'll track the 8- and 21-day EMAs at $40,670 and $41,800 as dynamic resistances.
A breakthrough above these short-term averages, followed by a clear daily close beyond $42,500, would serve as a recovery trigger, suggesting the technical end of selling pressure.
The sustainability of potential upward momentum in Bitcoin hinges on positive developments, with ETF news playing a pivotal role.
Easing pressure on Grayscale's GBTC redemptions has boosted market morale, but attention is on potential changes in Grayscale's fee policy, as highlighted in JPMorgan (NYSE:JPM)'s recent report.
The global increase in risk appetite holds significant importance for Bitcoin and the interconnected crypto markets.
Next week's focus on the US economy and the Fed's interest rate decision will be critical.
The markets anticipate the Fed to maintain current rates, but clues regarding potential rate cuts will be closely watched, influencing both traditional and Bitcoin markets.
Should Bitcoin maintain its support around $39,500 until the interest rate decision, it could create an opportune environment for recovery amid potential dovish comments.
In such a scenario, a decisive break above $42,500, reaching resistance at $44,300, might initiate momentum toward the $50,000 region.
On the downside, if Bitcoin fails to recover from the downward trend and dips below the 3-month EMA, it could potentially retreat to the $34,800 - $37,000 range.
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Disclaimer: This article is written for informational purposes only; it does not constitute a solicitation, offer, advice, or recommendation to invest as such it is not intended to incentivize the purchase of assets in any way. I would like to remind you that any type of asset, is evaluated from multiple points of view and is highly risky and therefore, any investment decision and the associated risk remains with the investor.